One Extra Mortgage Payment a Year: How Much Time and Money Can You Actually Save?
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Making one extra mortgage payment each year could shave years off your loan and save you tens of thousands of dollars in interest, without dramatically changing your monthly budget. Here's exactly how it works and whether it makes sense for your situation.
You're Not Alone in Wondering If This Actually Works
Mortgage advice can feel overwhelming. You've probably heard dozens of strategies for paying off your home faster, and it's hard to know which ones are worth your time and which ones are just noise.
The idea of making one extra payment a year sounds simple enough, but you might be wondering: Does it really make that much difference? Can I actually afford it? Is this the best use of my money right now?
These are fair questions. Let's walk through the real numbers and help you decide if this strategy fits your life.
How One Extra Payment Actually Works
When you make a regular mortgage payment, part goes toward interest and part goes toward your principal (the actual amount you borrowed). Early in your loan, most of your payment covers interest.
An extra payment goes entirely toward principal. This means:
You owe less money immediately
Future interest charges are calculated on a smaller balance
You build equity faster
Your loan ends sooner
The magic happens through compound savings. Every dollar you put toward principal today saves you from paying interest on that dollar for the remaining life of your loan.
The Real Math: What You Could Actually Save
Let's look at a realistic example.
Loan details:
$300,000 mortgage
30-year term
7% interest rate
Monthly payment: approximately $1,996
Without extra payments:
Total interest paid over 30 years: $418,527
Payoff date: 30 years from now
With one extra payment per year:
Total interest paid: $318,409
Payoff date: approximately 25 years from now
Interest saved: $100,118
Time saved: about 5 years
That's real money, over $100,000 that stays in your pocket instead of going to your lender.
Three Ways to Make That Extra Payment
You don't have to write one large check each year. Here are practical approaches that fit different budgets and preferences.
Option 1: Divide by 12
Take your monthly mortgage payment and divide it by 12. Add that amount to each monthly payment.
Using our example: $1,996 ÷ 12 = $166
Adding $166 to each monthly payment gives you the equivalent of 13 payments per year instead of 12.
Option 2: Use windfalls
Dedicate specific money to your extra payment:
Tax refund
Work bonus
Birthday or holiday cash gifts
Side hustle income
This approach works well if your monthly budget is already tight.
Option 3: Biweekly payments
Instead of paying monthly, pay half your mortgage every two weeks. Since there are 52 weeks in a year, you'll make 26 half-payments, equivalent to 13 full payments.
Note: Check with your lender first. Some charge fees for biweekly programs, and others don't apply extra payments correctly.
Before You Start: Important Things to Check
Not every mortgage handles extra payments the same way. Before you begin, confirm these details with your lender:
Ask about prepayment penalties. Most conventional loans don't have them, but some loans charge a fee if you pay off your mortgage early. This is rare but worth checking.
Clarify how extra payments are applied. You want extra money going toward principal, not toward next month's payment. When you send extra money, specify in writing that it should be applied to principal.
Verify your lender accepts extra payments. Most do, but the process varies. Some have online options; others require you to mail a separate check.
When One Extra Payment Makes Sense
This strategy works well if:
You have a stable income and can commit to extra payments consistently
You've already built a solid emergency fund (at least 3-6 months of expenses)
You don't have high-interest debt like credit cards
You're not sacrificing retirement contributions to make extra payments
Your mortgage interest rate is relatively high
When You Might Want to Wait
Extra mortgage payments aren't always the best use of your money. Consider holding off if:
You're carrying credit card debt at 18-25% interest (pay that first)
You don't have emergency savings yet
You're not contributing enough to get your full employer 401(k) match
Your mortgage rate is very low (under 4%) and you could earn more investing
A simple rule: Pay off debts in order of interest rate, highest first. If your mortgage is your lowest-rate debt, it moves to the back of the line.
A Simple Way to See Your Own Numbers
The examples above use specific numbers, but your situation is unique. Your savings depend on:
Your loan balance
Your interest rate
How long you've had your mortgage
How much extra you can pay
An amortization calculator can show you exactly how extra payments would affect your specific loan. Many free versions are available online. Plug in your numbers and experiment with different extra payment amounts to find what works for your budget.
What If You Can't Afford a Full Extra Payment?
Something is better than nothing. Even small extra amounts make a difference over time.
$50 extra per month on a $300,000 loan at 7% saves approximately $47,000 in interest and cuts nearly 3 years off your loan.
$100 extra per month saves approximately $78,000 and removes about 5 years.
Start where you are. You can always increase your extra payments later as your income grows or other debts disappear.
How to Actually Get Started
If you've decided this strategy makes sense for you, here's your action plan:
Call your lender and ask about their process for making extra principal payments
Choose your method, monthly addition, annual lump sum, or biweekly payments
Set up automatic transfers so you don't have to remember each month
Track your progress by checking your loan balance quarterly
Automation is your friend here. The less you have to think about it, the more likely you'll stick with it.
The Bottom Line
One extra mortgage payment per year is a straightforward strategy that can save you significant money and time, potentially six figures in interest and five or more years of payments.
But it's not the right move for everyone. Your decision should factor in your complete financial picture: emergency savings, other debts, retirement contributions, and your mortgage interest rate.
If the numbers work for your situation, this is one of those rare strategies that's genuinely simple and genuinely effective. You don't need special knowledge or complicated tactics. You just need to start.
Run your own numbers, talk to your lender, and decide what fits your life. Small, consistent steps are how real financial progress happens.
